Nomura targets investment banking recovery on Japan market rally

Nomura Holdings Inc., Japan’s biggest brokerage, said it expects its investment banking operations to recover this year as the country’s stock rally prompts companies to tap capital markets.

“We have a very positive view on our pipeline as the stock market and Japan as a whole are doing well,” Chief Financial Officer Junko Nakagawa said in Tokyo yesterday after the company posted third-quarter profit that missed estimates as investment banking fees fell. “We want to help Japanese corporates as their business opportunities improve.”

Investment banking has been a weak link amid a revival in profit growth at Nomura after it lost some business managing bond and equity sales following last year’s insider-trading scandal. The stock rebound, fueled by Prime Minister Shinzo Abe’s efforts to stimulate the world’s third-largest economy, may encourage companies to sell shares and make acquisitions.

“Business opportunities for Nomura will grow as it has a competitive sales force and branch franchise,” said Takehito Yamanaka, an analyst at Credit Suisse Group AG in Tokyo. “We’ll see more IPOs and share sales and individual investors will take more risks and buy mutual funds.”

Net income rose 13% to 20.1 billion yen ($221 million) for the three months ended Dec. 31 from 17.8 billion yen a year earlier, led by brokerage commissions and trading, Tokyo-based Nomura said in a statement yesterday. The result missed the average 31 billion yen profit estimate of eight analysts surveyed by Bloomberg.

Shares of Nomura have surged 85% since mid-November, when Abe began an election campaign by promising fiscal stimulus and urging the central bank to pursue more aggressive monetary easing to end deflation. The stock rose 2.1% to close at 526 yen yesterday before the earnings were announced.

Investors are the most bullish on Japan in more than three years, a survey of Bloomberg users showed Jan. 22. The Nikkei 225 Stock Average jumped 17% last quarter and closed yesterday at the highest since April 2010.

Chief Executive Officer Koji Nagai, 54, took the post in August after his predecessor Kenichi Watanabe resigned following revelations that staff gave tips on share sales the firm managed. The impact of the scandal will soon fade, said asset manager Mitsushige Akino.